Inflation Means Many of Us are Earning Less
As the U.S. Presidential elections loom, and the economy seems to be weakening, the economy is becoming the center of attention. And likely will stay that way for some time.
The New York Times The Board blog shows that paychecks (real wages) have been declining in real terms since last fall. This chart tells the tale:
One of the culprits appears to be inflation. As Felix Salmon of Portfolio notes:
“The chart doesn’t mention the main reason for the fall: unusually high inflation. Since inflation is running at a 4% clip right now, you’d need wages to be rising at the same rate in nominal terms just to stay at zero on this chart. If food and energy prices stop rising at some point, real wages will start looking much healthier.”
The candidates will be out in force to convince us how terrible the economy is and, therefore, what they can do to make things better. Some of that is typical electioneering — and lucky for us that it’s usually never as bad as the candidates paint it.
But that doesn’t change the fact that inflation has crept into our lives and into our businesses. Things are costing more. Not only are wages affected, but business profit margins too. As the costs of raw materials rise, and businesses have to raise the rates they charge others, everything gets “inflated.” Hmmm, I suppose that’s why they call it inflation.
